Policy

November 21, 2013 at 8:47 am

Want to Cut the Cost of Food Stamps? Do Nothing!

Fiscal conservatives, rejoice! It turns out the best way to control the cost of the food stamps is to simply do nothing.

In a recent report, the Center on Budget and Policy Priorities found that, after taking into account the automatic cuts to food stamps that took effect November 1, in just a few short years the cost of the program will mirror that of the late 1990s.

The graph below shows the projected trajectory of costs in the program. Spending on food stamps is presented relative to GDP because — as economists have noted repeatedly — this controls for economic growth, population increases, and inflation, giving context to the size and scope of the program that is not provided by raw spending figures.

SNAP

It’s worth noting that the drop in the cost of food stamps — also known as the Supplemental Nutrition Assistance Program or SNAP — occurs without taking into account any additional cuts currently being debated in Congress.

The reduction in the cost of SNAP without further cuts happens for two main reasons.

First, since SNAP participation is highly correlated with the state of the economy, direct spending on the program will fall as the country heals from the financial crisis. Just as the recession increased the number of people participating in the program, as the economy recovers and job growth continues, many will drop out.

Second, since the above graph shows spending relative to the economy, overall costs will fall even further as the economy expands.

The former explanation shrinks the “numerator” in the above equation, and the latter increases the “denominator,” resulting in the drop shown in the graph.

But this projected decline in food stamp costs is in jeopardy, ironically because of the current push to additional cuts to the program. This may sound counterintuitive, but it makes more sense when SNAP’s effect on the economy is taken into account.

Food stamps have been proven to be one of the most stimulative forms of government spending. For every dollar spent on food stamps, the increase in economic output is greater, with higher estimates being around $1.70. This is mainly because the people who receive food stamps typically live paycheck to paycheck, and the aid given to them is spent immediately. This provides local businesses with a jolt in consumer spending, leading to increased business spending and job growth down the pipeline.

Cutting food stamps would have the reverse effect, with a $1 reduction in the program reducing GDP by $1.70. Take $40 billion out of the program — as House Republicans are currently trying to do — and you reduce GDP roughly $65 billion.

Returning to the graph, additional cuts in food stamps would cause the dotted line portion to shift upward. This is because while the “numerator” would be reduced by the direct cuts, the “denominator” would fall as well and at a faster rate, causing long term costs to increase.

So if conservatives are being honest about wanting to bring the cost of the program under control, the best course right now is to do nothing.

However, as I’ve stated before, it is clear that the campaign against food stamps was never about fiscal discipline, and is instead driven primarily by contempt for the poor.

-Albert Kleine